MANISH GUPTA
Ranchi, Sept 2: Chief Minister Hemant Soren ticked off a key poll promise by restoring the Old Pension Scheme (OPS) on Thursday. The decision, which might prove to be a major strain on state finances in later years, has been hailed by the state employees.
“This is a big decision by the state government. The return to the Old Pension Scheme will benefit around 1.25 lakh state government employees,” State President of National Movement for Old Pension Scheme (NMOPS) Vikrant Singh told lagatar24.com.
The state Cabinet on Thursday approved the Standard Operating Procedure (SOP) for quitting the New Pension Scheme (NPS) and opting for OPS, which was discontinued on April 1, 2004. The decision will benefit those recruited in 2004-05 and beyond.
As per the SOP, only those employees who give an affidavit to follow its rules and not place any additional financial claim on the state government will be allowed to switch to the OPS. This will hold true even if the employee’s contribution in NPS is not received.
It may be noted that under the NPS, contribution from both the employees (10%) and the government (14%) is held with the National Securities Depository Limited (NSDL) for investment in different asset classes like equity and government bonds.
As per the rules of the Pension Fund Regulatory and Development Authority (PFRDA), the money can be returned only to the employees and that too at the time of retirement. The SOP says the employees will have to return the government’s contribution.
Regarding any financial loss to the employees due to the delayed transfer of money from NPS to OPS, Singh said, “It’s not about the actual amount which faces the market risk. The old pension is an assured pension and it’s all about social security.
“The state government has done its best under the given circumstances. NPS money is not going anywhere. It will come to us at the time of retirement. We are trying to get the PFRDA to release our and the state government’s money as we are state employees.”
Under the NPS, the retired employee gets 60% of the accumulated amount and 40% goes to annuity funds that provide a monthly pension. As per a calculation, 51%-59% will be the government’s contribution (less than the 60%), which will have to be returned.
“Another advantage is that the 10% deduction for NPS will stop from this month and a similar amount starting from 6% has to be invested in the General Provident Fund. It will not be a locked amount and can be accessed easily at times of need,” said Jharkhand Veterinary Service Association General Secretary Dr Shivanand Kanshi.
The rules further say that the benefits will also be given to the employees who retired between December 1, 2004 and September 1, 2022. Jharkhand Finance Department will carry out all the work related to implementation of the OPS.
As for the financial implications of the reversal to the Old Pension Scheme on the state government, Harishwar Dayal, Director in Chief, Centre for Fiscal Studies, Government of Jharkhand, said that it will initially lead to savings but can be a burden later.
“This will initially lead to major savings but will become a huge burden once these new recruits start retiring. But the 14% savings will begin from this month. People who joined in 2004-05 and later will start retiring (say 25 years later) from the year 2030-2031.
“According to a rough calculation, the 14% outgo under the NPS in 2030-31 would have been Rs 5,300 crore. This is saved. And, if we save and invest the 14% amount during September 2022 till March 2029, the return will be about Rs 1,500 crore per annum.
“However, this saving of about Rs 7,000 crore in fiscal 2030-31 alone will become smaller in comparison to the pension burden that will increase over the years after that. It may breakeven by about 2035-36 and then the pension amount will surpass the savings.”
Jharkhand already pays 35% of its total revenue receipts towards salary and pension. The pension amount in 2020-21 was Rs 6,796.5 crore, salary was Rs 12,836.6 crore and the total revenue receipt of the state government stood at Rs 56,149.7 crore.
Considering the current political crisis in the state where Chief Minister Hemant Soren faces an office-of-profit case that may lead to his disqualification, the year 2035 may seem far beyond. Far enough for at least three more elections in 2024, 2029 and 2034.
